J.P. Morgan CFO Pick Goes With – and Against – the Grain

J.P. Morgan Chase’s promotion of Marianne Lake to chief financial officer adds to the growing number of financial services firms appointing a woman to that post. But it also bucks the trend of large banks often looking outside their finance departments for their CFOs lately.

Women made up more than 14% of the CFOs at financial services firms among companies in the Fortune 500 list at the end of last year, putting it ahead of other industries when it comes to women holding the top finance job, according to a study published in September by executive recruiter Spencer Stuart. Barely 4% of life sciences firms, by comparison, have a female CFO. The percentage of women CFOs among all members of the list has climbed steadily since 2007 and has risen to 10.8% as of the end of last year, the recruiter found. It remains more likely for female CFOs to be promoted from within, as 33 of the 54 female CFOs on the list were internal appointments.

Lake will become CFO and join the bank’s operating committee early next year, at which time Braunstein will become a vice chairman. She is currently CFO of its consumer and community banking operations, and was previously controller of its investment bank. People close to the company told the Journal that J.P. Morgan’s female commodities head, Blythe Masters, was one of two other top candidates for the post.

When it was announced that Braunstein was stepping down, analysts speculated that he would be succeeded by someone outside the finance department, as is common among very large banks.

“Part of the reason is the role a CFO plays at a company like J.P. Morgan,” Jeff Harte, an analyst at Sandler O’Neill, said at the time. He described the position as more “managerial,” as opposed to one focused primarily on finances. “It’s about interacting with shareholders and interacting with clients.”

Lake, however, has deep finance experience. She previously served as controller for the investment bank, helping with due diligence on the purchase of investment bank Bear Stearns in early 2008, the Journal reported. She was named CFO for the retail side of the bank in 2009 and remained as top finance chief for consumer banking, mortgage and credit cards when the bank reorganized its business units last summer.

“Having had the opportunity to experience the investment bank in the financial crisis and the consumer bank broadly, including housing, in the housing crisis, it can’t do anything but BE additive to my experiences,” Lake told Dow Jones Newswires in an interview. “Plus it did give me the opportunity to work with a broad range of people on the operating committee and other senior leaders, so I have some relationships there that otherwise I wouldn’t have had.”

With that, she’s deeply familiar with the challenges facing CFOs in the banking industry, including net interest margin compression, liquidity management, and navigating the still developing regulatory environment for banks.

J.P. Morgan is also still recovering from the “London Whale” trading losses – at least its reputation – that cost it billions of dollars and led to a shakeup in some of its top management. Braunstein, who has been CFO since 2010, saw his reputation damaged when he dismissed the impact of those trading activities in April, saying: “We are very comfortable with our positions as they are held today.” And he saw his stature at the firm downgraded in July when he was forced to report to Co-Chief Operating Officer Matt Zames, instead of CEO Jamie Dimon. J.P. Morgan, however, said at the time of Braunstein’s announced departure, that his exit did not have anything to do with the trading loss.

Given how fast the trading losses came down on J.P.Morgan, it was good for the company to wait to switch CFOs until the best candidate was found, Mr. Cassidy said. “Caution was the better course to proceed.”

“When a debacle of that size happens, senior management changes have to be made. Whether it is fair or not can be debated, but some people fall on their sword. CFOs are often the head that is served on the platter.”

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